Spending wisely: Both the state and foreign firms are ramping up investment

Expenditure on health in Saudi Arabia is low by regional standards in per capita terms; however, it is high as a proportion of GDP and is rising, with the government having significantly boosted the health budget in 2011. Funds committed to the sector under the latest five-year plan have also risen. A number of major state-funded infrastructure and medical city projects are currently under way with more to follow, and the private sector is following the government’s lead, including plans by major foreign firms to step up spending in the industry.

Health Expenditure

Total spending on health in 2010 stood at SR69.96bn ($18.6bn) according to World Health Organisation (WHO) figures, up from SR61.14bn ($16.29) in 2010. Of this, SR43.97bn ($11.7bn) was accounted for by general government expenditure (representing 7% of total general government expenditure), of which SR32.62bn ($8.7bn) came from the Ministry of Health (MoH). Private expenditure on health stood at SR25.98bn ($6.92bn).

Total spending on health per capita stood at $679.70 in 2010, according to World Bank data (up 11.8% on the previous year’s figures), the second lowest level in the GCC, ahead of Oman in bottom place. MoH expenditure per capita stood at $375 in 2011, according to ministry statistics.

However, health spending as a proportion of GDP was the second highest out of the six GCC states, behind only Bahrain’s 5%, and has been rising over the medium, hitting 4.29% in 2010 according to Word Bank figures; this was slightly down on the 4.38% recorded in 2009 but up from 3.8% five years earlier in 2006. Public health expenditure accounted for approximately 7% of government spending in 2010 and 2.7% of GDP, while private health outlays were equivalent to 1.6% of GDP.

Rising Expenditure

Spending is set to continue to rise as the MoH and other actors boost their outlay and invest in infrastructure. In December 2011 the government announced that it would increase health expenditure by 26% in the forthcoming annual budget. Health projects included in the budget include the construction of 17 new hospitals and the roll-out of primary health centres across the country, with $4.27bn allocated to building new facilities.

Spending is also rising over the longer term; under the ninth development plan, which runs from 2010-14, SR242.67bn ($64.67bn) is being allocated to social and health development, up 82.4% from the previous plan. Spending on health represents 16.8% of total spending under the plan, up from 15.4% previously. Funding will go to the MoH as well as other institutions such as the King Faisal Specialist Hospital and Research Centre, the Saudi Red Crescent Authority, and the Saudi Food and Drug Authority.

Key elements of the plan as regards the health sector include improving the general health of the population and enhancing the complementary role of the private sector. Under it the government aims to increase the number of MoH hospital beds to 56,379, as well as the number of beds in other government hospitals to 18,875 and the number of private sector beds to 20,860, in order to give rise to a rate of 3.5 beds per 1000 of population. This would represent a 74% expansion in the total number of beds in the Kingdom in 2009 (the year before the plan began), to 97,535. The number of physicians in MoH hospitals, other state hospitals and private sector hospitals will grow to 32,657, 18,875 and 14,602, respectively, while nursing staff will grow to 65,314, 36,533 and 29,204, respectively. The number of primary health care centres will also be expanded, to 2958 from 2037 in 2009, the year prior to the launch of the plan. Other targets include reducing infant mortality to below 12 per 1000 live births and mortality for children under five years of age to under 15 per 1000 live births (from 17.3. and 20 respectively the year before the launch of the plan).

Large-Scale Investment

In addition to the ninth development plan, the MoH is also operating its own five-year strategic plan, which it launched in 2011 and which also involves large-scale infrastructure investment. Key elements of the initiative include the construction of 121 hospitals, in addition to the renovation of 66 existing hospitals.

A Focus On Infrastructure

This increase in spending has given way to major infrastructure projects, including the construction of the 1350-bed King Faisal Medical City in the south of the country. The MoH gave the go-ahead for the $373m first stage of the project in February 2012 and construction began the following month. In September that year the ministry announced that the first phase of the project was 20% complete and that construction was set to be finished by mid-2014, two years ahead of schedule, followed by a second stage the following year. The project as a whole is budgeted at $1.1bn and in addition to a 500-bed main hospital, being built under a $172m contract inked in February 2012, will include specialised facilities, such as a cardiac and neuroscience hospital, in addition to an eye hospital and residential units and hotels.

Recent Projects

Examples of other recently approved smaller-scale projects include a $67m children’s and maternity hospital in the northern city of Al Jouf. The facility will have 300 beds. The government also signed the contract for its construction in February, as well as for the construction of a 300-bed hospital in Hail and a 100-bed hospital in Abqaiq. More contracts were approved in late summer and early autumn; for example, in August the MoH signed off on projects worth a combined $1bn including the construction of the first phase of the Prince Mohammed Bin Abdulaziz Medical City, as well as hospitals in Asir, Jeddah, Jezan, Makkah and Medina.

The authorities in August 2012 also set aside plots of land for two new major projects, one of which will be built in Jeddah (for which 2m sq metres of land has been reserved) and another medical city between Jeddah and Makkah (3.5m sq metres).

In September 2012 a SR1.18bn ($314.4m) contract was awarded for the construction of new facilities at King Fahd Medical City (KFMC) in Riyadh, including a 238-room cancer care centre, a neuroscience institute and a cardiac centre, as well as associated services and infrastructure. The project is due to completed within three years. Then in October 2012 the authorities awarded another contract for construction at KFMC, this one worth SR278m ($74m), for the Gulf region’s first proton beam cancer therapy centre. In September plans for the construction of six health centres in the province of Jezan – namely two general hospitals, a maternity hospital, a mental health hospital, a 500-bed specialist hospital and a primary health care centre, at a cost of $331m – were also announced.

Private Investment

Private companies are also investing in expansion. For example in February 2012 the Sulaiman Habib Medical Group said it was investing around SR2.3bn ($613m) to establish two medical cities, namely an SR1.5bn ($399.8m), 500-bed facility in northern Riyadh and a SR800m ($213m), 410-bed institution in Alkhobar. In September 2012 the Kingdom Holding Company announced plans to spend SR550m ($146.58m) to enlarge its Kingdom hospital facility in northern Riyadh over a period of three years, adding 150 rooms. The hospital is in the process of merging with another Riyadh health institution, Consulting Clinics, with plans for the merged entity to launch health clinics across the city, and then the Kingdom as a whole.

Foreign firms are stepping up their commitments within the sector as well. Also in September, US conglomerate GE announced plans to invest $1bn in three key areas of the Saudi economy, including health care. These investments will go toward a number of projects, including the establishment of a health care learning and simulation centre in collaboration with King Fahd Medical City; partnerships with the MoH that will help integrate various IT systems in the sector; and the creation of a performance improvement unit that will aid in boosting the efficiency of the ministry and some of its facilities.